Lack of revenue Plan B stuns IMF
VISITING MISSION TOLD: NO POLITICIAN
WANTS TAXES IN ELECTION YEAR

By Jun Vallecera
Reporter

THE government bared on Tuesday the absence of alternate revenue sources under next year’s budget and told the visiting International Monetary Fund team about it.
           
The admission, government officials said, took the IMF team by surprise and mission leader James Gordon wanted to know if there was in fact a Plan B.
           
“There is no Plan B and the IMF, perhaps confused, asked us how that came about. We told them next year was going to be an election year and no legislator was in any mood to support new tax measures,” Finance Undersecretary Gil Beltran said.
           
Beltran said the government will rely solely on existing tax measures to achieve its revenue goals in 2007 and on the capacity of the main collection arms to deliver on their commitments.
           
He said the IMF drew a scenario in which the existing measures proved difficult or impossible to implement and what Finance Secretary Margarito Teves would do if that happens.
           
“What were we to do in the event something like that happens?” Beltran asked, quoting the IMF.
           
He said the government assured that this year’s projected tax effort, which views the actual revenue performance against total local output or the gross domestic product, was on track toward the year-end goal of 14.7 percent of gross domestic product.
           
This may pale against the historical highpoint of 17 percent of GDP in 1997, but Beltran said this represented a recovery from a low of 12.5 percent a few years earlier.
           
From peak point of 17 percent in 1997 the country’s tax effort deteriorated soon after the Asian financial crisis broke as asset prices burst and banks incurred more and more non-performing loans.
           
But Beltran said the economy has since rebounded and last year’s 5.1- percent GDP growth was likely to be sustained this year at the very least.
           
“The various tax measures have also started making an impact on collections and some that were completely ignored by legislators in the past have also been adopted,” he said.
           
These developments helped boost confidence next year’s revenue program will deliver its promises, Beltran added.
           
Next year’s budget program envisions a 15-percent rise in revenues to P1.118 trillion against anticipated revenues of only P974.1 billion this year.
           
Barring extremely unfortunate events and acts of God, current numbers indicate next year’s revenues should equal at least 16.7 percent of GDP or better than this year’s projected tax-effort of only 16.2 percent, Beltran added.
           
Still, he said the government knows that Vietnam and most other countries in East Asia have better tax effort ratios than the Philippines.
           
Vietnam has a tax-effort ratio of 22.9 percent, South Korea has 20.4 percent, Malaysia has 19.5 percent, Singapore has 19 percent and Hong Kong has 17.4 percent.